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The limited upside in markets after the rally, Nifty to be at 15,000 by December 2021: Bofa Securities

After the strong rally since April, there is a limited upside in Indian equities and the markets will end 2021 with a low single digit gain, an American brokerage said on Wednesday.

Bofa Securities said it is ‘not as bullish’ and gave a target of 15,000 points for the 50-share benchmark Nifty by the end of the newly started year.

Markets have rallied by 80 per cent since April after a heavy 40 per cent correction following the announcement of the COVID-19-related restrictions. Many analysts, including RBI Governor Shaktikanta Das, have raised concerns over the over-heating in the markets.

The benchmark Nifty was trading 0.6 per cent up at 14,607 points at 1259 hrs on Wednesday. ”We are giving a target of 15,000 on the Nifty, which means there is a limited upside now. We are still bullish, but not as bullish,” its India equity strategist Amish Shah told reporters. He mentioned the strong rally witnessed by the markets in the immediate past for its more conservative view on the markets.

The brokerage is overweight on sectors including financials, metals and steel, and industrial, he said, adding that information technology, energy, consumer discretionary and auto are the sectors on which it is underweight.

Within the financial sector, Shah said the brokerage feels the banks are adequately provided for the possible asset quality reverses and called the prediction of a jump in the dud assets by RBI in its biannual Financial Stability Report as conservative. He said the valuations of banking and financial companies are also lower from the historical highs which make it an attractive bet, and adde d that there is also a chance of higher credit growth fueling earnings for select lenders which will make it an attractive bet.

On the metals and steel and industrials sectors, the call is driven more from a likely surge in capital expenditure from the government, real estate and infrastructure sectors which we should be seeing, he said.

The upcoming budget will have an expansionist bias in the fiscal policy while the inventory levels will dip in the realty sector, leading to a surge in new projects, he said. Shah, however, said that a full private sector capital expenditure cycle recovery is still two years away and it will be select sectors which will be seeing a growth in investments in 2021.

The target on the benchmarks also assumes a net addition of USD 10 billion to the foreign portfolio flows into the country, over and above the USD 22 billion in 2020, he said.

The foreign flows will continue on the back of stimulus measures and easy monetary policies in the developed world, he said, adding that Joe Biden will continue with such measures in the US on taking charge.

Shah also said that the government will continue on its reforms agenda in the new year as well and specifically pointed out power sector where there can be greater private sector play in distribution.

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IEX expands Green Market; Adds daily, weekly contracts

Indian Energy Exchange (IEX) on Friday announced the expansion of its Green Market with the launch of new contracts that will offer greater choice to market participants to buy renewable energy on the same day and up to 11 days ahead.
IEX has expanded its delivery-based Green Market with the launch of two new products – Green Daily Contract and Green Weekly Contract, an IEX statement said. According to the statement, trading in the new contracts in both solar and non-solar segments will commence with immediate effect.

With this launch, the IEX Green Market now has four contracts, and offers greater choice to market participants to buy renewable energy on the same day and up to 11 days ahead. In a first for IEX Green Market, the Daily and Weekly contracts, will enable market participants to trade in on energy basis (MWh) with the bidding taking place on a 15-minute time-block.
The trading in energy terms will help to address the intermittency issues involved in renewable energy procurement.

Further, this will also assist market participants to minimise deviations as well as related penalties. Energy will be delivered leveraging the national, regional and state level transmission network. The Green Market at IEX, a first of its kind initiative in the country, was formally launched by Power Minister R K Singh on September 1, 2020. The market has received encouraging response from all stakeholders and has cumulatively traded 459 MU (million units) comprising 404 MU under Solar and 55 MU under Non-Solar segments within 100 days since the commencement of trading on August 21, 2020.

Moreover, it stated that with an average price of Rs 3.47 per unit in solar and Rs 3.77 per unit in non-solar segments, the market offers an attractive avenue to participants for renewable energy procurement. “India is witnessing a rapid change in the energy sector with renewables driving the energy shift. To meet our ambitious renewable energy targets and sustain the existing pace of growth in renewable capacity addition, there is a need for a market-based framework.” IEX Chairman S N Goel said.

IEX Green Market allows the obligated entities to meet their Renewable Purchase Obligation as well as facilitates efficient and seamless integration of the renewable energy. With a total of 36 market participants, the platform is being leveraged by the distribution utilities, renewable generators and open access consumers.

The utilities from the States and Union Territories of: West Bengal, Haryana, Dadra and Nagar Haveli (DNH), Daman & Diu, Delhi, Bihar, Maharashtra, Delhi, UP, Telangana and Karnataka amongst the top market participants on the IEX

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Burger King India IPO: Listing gains in offing; retail quota subscribed over 17 times so far

Burger King India initial public offer (IPO) received a robust response from retail investors on the day one of the bidding process. The Rs 810-crore issue received bids for 26.46 crore shares against 7.44 crore equity shares on offer, implying an overall 3.53 times subscription, so far. Most of the brokerages suggest to subscribe to one of the fastest growing international QSR chains in India for the listing gains. The issue is being sold in the price band of Rs 59-60 apiece. Link Intime India Pvt Ltd will manage allocation and refund of the issue and is the registrar of Burger King India IPO.

According to the exchange data, retail portion saw 17.64 times applications as retail had the lowest allocation quota of only 10 per cent. While, non-institutional investors (NIIs) and Qualified Institutional Buyers (QIBs) bid for 75 per cent and 17 per cent, of their respective quotas. These two categories usually subscribe the most on the last day of the three-day bidding process. Burger King India has reserved up to 75 per cent of the issue for QIBs while 15 per cent for NIIs.

Subscribe to Burger King India for listing gains

Analysts at GEPL Capital recommend to ‘subscribe’ to Burger King India IPO for listing gains. At the upper price of Rs 60, the offer is priced at 14.8x FY20 CFO (cash flow from operations) per share. “As a long-term investment, we would wait a few quarters for signs of a sustainable recovery in the same-store sales growth and the ability to repay the pending obligations with a sustainable debt to equity,” Gaurav Hinduja, Associate Analyst at GEPL Capital said.

Research and brokerage firm Motilal Oswal Financial Services has also suggested to subscribe to the issue for listing gains. The brokerage firm said that considering Burger King India’s strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India, it expects its financials to improve going ahead. The net debt/equity as of Sep’20 stood at 3.3x which post IPO will reduce to zero.

Burger King is one of the fastest-growing QSR businesses in India; it has been growing at a CAGR of 98% over 5 years bearing Covid-19 impacted quarter. “We, therefore, expect the growth trajectory will continue and its financial position to improve going ahead. Therefore, we recommend to subscribe over the issue,” said analysts at Dealmoney Securities.

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Indian cryptocurrency startups’ victory bigger than the price of Bitcoin

With the speed cryptocurrency is emerging as the Millennial generation’s alternative asset of choice in India, it’s hard to imagine that just two years ago a couple of blockchain pioneers were briefly in police custody. Sathvik Vishwanath and Harish BV, cofounders of a then five-year-old startup, were arrested in late 2018. No, they hadn’t pulled off a shady initial coin offering. Their “crime” was that they put up a kiosk in a mall in Bangalore where customers could swap Bitcoin, Ether or Ripple for cash or vice versa. That was the whole point of Unocoin, their crypto token exchange. But the police were suspicious of the new-fangled “ATM.”

A lot has changed since then. Unocoin, which just raised financing from Tesla Inc.-backer Tim Draper’s Draper Associates, is flourishing, together with other Indian blockchain ventures. India’s share of person-to-person virtual-currency trading in Asia has surged to 33%, the same as in China, according to Oslo-based Arcane Research’s analysis of volumes on Paxful and LocalBitcoins, the biggest platforms for transactions in the region.

Some of this is no doubt due to the bubbly rise this year in Bitcoin, which recently came within $100 of its all-time high after surpassing $19,000 for the first time since 2017. Even after Thursday’s wobble, prices have still more than doubled this year.

But fundamental factors are also at play. Sending money to India in a tokenized form, and thus avoiding hefty bank charges, is becoming an option. Some customers of digital-asset exchanges, probably tech-savvy freelancers, receive tokens at regular intervals as payment for their work and convert them into rupees via their local bank accounts. Families in India are using the same channel to send money to students overseas.

Having the world’s largest diaspora — and more than $100 billion in two-way money flows last year — isn’t the only thing. Prime Minister Narendra Modi’s disastrous ban on 86% of the country’s currency in November 2016 shook Indians’ faith in fiat money. Add the fear of leaving spare cash in banks when three major deposit-taking institutions have crumbled in the past 15 months. No wonder Arcane expects Indian crypto volumes to overtake China’s.

The domestic asset management industry is also helping adoption of crypto — by its incompetence. Most large-cap fund managers have struggled to beat their benchmarks, especially in recent years. The Nifty 50 index has returned only about 2% annually in dollar terms over the past decade. Yet, as Bloomberg Intelligence’s Gaurav Patankar and Morgan Barna have shown, lack of performance hasn’t kept managers from pocketing high fees.

Disgruntled younger savers are taking note, and dipping their toes in U.S. exchange-traded funds. At 1%, international allocation is still tiny, the Bloomberg Intelligence analysts say, but it’s growing rapidly. Ditto for crypto-investing, even though holding a highly volatile digital asset over the long term isn’t for the faint of heart. Only 600 of Unocoin’s 1.2 million customers have started a systematic buying plan to invest (mostly) in Bitcoin. But 99.5% of them are sitting on profit, and must be bragging about it to their friends.

There’s one dampener: regulation. Nobody wants a return to 2018, when the Reserve Bank, the monetary authority, instructed banks not to entertain customers who dealt in virtual currency. The draconian approach nearly strangled India’s blockchain revolution. The action against Unocoin’s kiosk in Bangalore was like the heavy hand of the state crashing down on a kids’ lemonade stand. If folks in India’s technology capital couldn’t pay cash to buy digital tokens, then the asset was effectively being banned nationwide.

In hindsight, the founders’ ordeal with the police proved to be a blessing in disguise. Young entrepreneurs joined together, went to the Supreme Court in New Delhi and got the RBI’s direction to banks declared unconstitutional. That was in March. Already, the exchange has seen a fivefold jump in trading, averaging $150,000 a day, from $30,000 before the court’s verdict. Of late, trading is much higher, thanks to the rally in Bitcoin prices. Larger bourses such as CoinDCX were witnessing daily volumes of almost $700,000, when I last checked.

The players are urging the government to bring digital assets under the existing money-laundering law, which will give the industry legitimacy. The next step would be to regulate the tokens as money or securities, depending on their use.

India’s phlegmatic bureaucracy may wonder if this is all a craze. Perhaps not. It isn’t even unique to Indian Millennial and Generation Z consumers. Wringing the global banking industry dry of its exorbitant fees, and putting more purchasing power in people’s hands after the Covid-19 pandemic, will be a worldwide goal. In their study titled, “What We Must Do to Rebuild,” Deutsche Bank AG economists are advising companies and policy makers to design alternatives to credit cards and “remove middleman fees.” In the short run, conventional fintech will help, but in the longer term, major economies will all do this by replacing cash with their own central bank digital currencies.

That’s when older consumers will join in. If they don’t, they’ll get get stuck, and not just figuratively. Automatically triggered crypto “smart contracts“ will make it possible for self-driving cars to switch lanes faster than others. Commuters will be continuously paying one another in official digital currencies — or in stablecoins like Facebook Inc.’s proposed Libra, private tokens whose values are fixed against fiat money.

The Indian Millennials have read the tea leaves right.

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